Israel plans to build thousands of new homes for its settlers in the occupied West Bank and East Jerusalem, an Israeli official said on Friday, defying a United Nations vote that implicitly recognised Palestinian statehood there.

The official, speaking on condition of anonymity, said Prime Minister Benjamin Netanyahu's conservative government had authorised the construction of 3 000 housing units and ordered "preliminary zoning and planning work for thousands" more. The official would not elaborate.

But Israeli media said the government sought to hammer home its rejection of Thursday's upgrade, by the UN General Assembly, of the Palestinians to "non-member observer state" from "entity".

Israel and the United States had opposed the resolution, which shored up the Palestinians' claim on all of the West Bank, East Jerusalem and Gaza Strip, saying territorial demarcation should be addressed in direct peace negotiations. The Israelis were further incensed by what they deemed an inflammatory speech by Palestinian President Mahmoud Abbas at the world forum, and said the upgrade resolution neglected the Jewish state's security and need for its own sovereignty to be recognised.

Peace talks have been stalled for two years amid Palestinian anger at continued Israeli settlement.
The Israelis insist they would keep West Bank settlement blocs under any final accord as well as all of Jerusalem as their capital.

That status for the holy city has never been accepted abroad, where most powers consider the settlements illegal for taking in land captured in the 1967 Middle East war.

"While the Palestinians are doing everything possible to keep the two-state solution alive, including with our vote in the United Nations, yesterday, the Israeli government is doing everything possible to destroy it," Palestinian negotiator Saeb Erekat said in response to the new settlement housing plans.

The 193-nation UN General Assembly overwhelmingly approved the de facto recognition of the sovereign state of Palestine after Abbas, in his speech, urged members to issue what he said was its long overdue "birth certificate."

Approximately 500 000 Israelis and 2.5-million Palestinians live in the West Bank and East Jerusalem. Israel withdrew settlers and soldiers from Gaza in 2005 after 38 years of occupation. The Mediterranean coastal enclave is ruled by Abbas's rival Hamas Islamists, who reject co-existence with Israel and waged an eight-day war with the Jewish state in November. – Reuters